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Mercer Island City Council explores biennial budget options
The Mercer Island City Council got a lesson last Saturday in general fund budget planning amid an uncertain recession.
Financial Director Chip Corder led the discussion with a cautious general fund forecast and solicited input from City Council members to work up a budget balancing strategy.
"We've got a 3 percent problem. That's real service and that's real dollars," City Manager Rich Conrad reminded the group. "It's manageable, but we have to make some hard decisions."
The city has found a way to manage without service cuts until now, he said.
"It's not time to leap to 'The sky is falling.' The sky is just dark," he said of the budget situation.
Corder grounded the Council in the discussion by illustrating the situation with three scenarios to bridge the projected $1,438,142 and $1,581,772 deficits in 2011 and 2012, respectively, via cuts to expenditures, generating new revenue, or by a split between the two.
"A mix sounds good to me, but does anyone want full tax or full cuts?" Bassett asked the group following Corder's budget introduction.
In anticipation of long work hours and weighted discussions, there will be an extra meeting this year during the budget review.
"Time got 'squished' last year," Corder reminded City Council. There will be nine more budget-centric meetings following the 2011-2016 Capitol Improvement Program (CIP) preview shown to the City Council on June 21. The 2011-2012 budget is slated for adoption at the regular City Council meeting scheduled for Dec. 6.
Property, sales and utilities tax are expected to continue to bring in the greatest amount of revenue to the city.
The major expenses on the horizon are expected to be medical premiums and retirement rates, Corder said.
Employee benefits continue to be the city's second-highest expenditure behind salaries and wages.
On a positive note, there will be a reduction in funds transferred out of the general fund and into the accounts for technology and service, and Youth and Family Services, he said.
The city will reduce the annual transfer of funds from the general fund to the technology and equipment fund from $250,000 per year to $175,000 per year in 2011-2012 and reduce the annual subsidy to the Youth and Family Services fund from $465,000 per year to $440,000 per year during the same time.
Under Corder's "more likely scenario," the city's beginning fund balance and revenues could total $23,061,733 in 2011, while he anticipates expenditures at $24,966,032. Those numbers leave a deficit of $1,438,142. If the trend continues, Mercer Island could face a deficit of $2,390,206 by 2015 if nothing is done to right the ship.
"My hope is that you look at this and go, 'You know, it's not that bad,'" he said. "This, again — it's not carved in stone."
Corder laid out six budget balancing tools including an across-the-board reduction of 3 percent in 2011 and an additional reduction of 3.3 percent in 2012, 9 (non-public safety) full-time employee layoffs in 2011 and 9.5 additional (non-public safety) full-time employee layoffs in 2012, the use of $165,000 in banked property tax, propose a levy lid lift, increase utility tax by 1 percent on city water, sewer and stormwater utilities, or create a transportation benefit district that would charge a licensing fee of $20 per car and generate an additional $360,000 each year.
One or more of these tools can be used to help balance the budget, he said.
Deputy mayor El Jahncke, Council members Steve Litzow, Mike Cero and Mike Grady asked Corder to cut expenditures before tax hikes or levy lid lift proposal. Council members Dan Grausz and Bassett favored a mixture of increased revenues through taxes or levy lid lift and a reduction in spending.
"Use me as your performance indicator," Corder said. "If I'm stressed, you should be stressed."